The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amount of assets and liabilities and disclosures on contingent assets and liabilities at the balance sheet date and the reported amount of income and expenses during the reporting period. Actual amounts may differ from these estimates. The estimates and assumptions are based on experience and other factors considered relevant in measuring the carrying amounts of assets and liabilities where these are not readily apparent from other sources. Demag Cranes AG reviews the estimates and underlying assumptions on an ongoing basis. Revisions to accounting estimates are recognised in the period in which an estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

In the preparation of the Financial Statements, the Management Board of Demag Cranes AG used estimates and assumptions relating to material items as follows:

• Assessment of the Need to Recognise Impairments and Measurement of the Amount of Any Impairment Loss

The Group assesses at each reporting date whether there is any indication that assets are impaired. In estimating fair value less costs to sell, the Management Board makes assumptions regarding expected future cash flows from each asset or cash-generating unit, using appropriate discount rates and appropriate growth rates. The fair value less costs to sell of trademarks in other intangible assets is determined using the relief from royalty method. Impairment testing has confirmed the carrying amounts of goodwill and trademarks.

• Estimated Useful Lives

At each year-end, the Group reviews the estimated useful lives of intangible assets, property, plant and equipment and investment property. As in the previous year, the review has not identified any need to alter the estimated useful life of any asset.

• Recognition and Measurement of Development Expenses

Development expenses are capitalised if the recognition criteria in IAS 38 are satisfied. Initial recognition is based on management estimates. For this purpose, management makes assumptions concerning the size of expected future cash flows, the applicable discount rates and the period over which expected future benefits will be generated. EUR 643,000 in development expenses were capitalised in financial year 2008/2009 (2007/2008: EUR 696,000). Impairment testing of capitalised development expenses resulted in recognition of an impairment loss in financial year 2008/2009 of EUR 5,967,000. Further information on the impairment of capitalised development expenses is provided in Note 15.

• Accounting for Pensions and Similar Obligations

The Group uses actuarial valuations in the measurement of pensions. These valuations are made on the basis of expected returns on plan assets, future salary increases, mortality, future pension increases and expected discount rates. Due to their long-term focus, these estimates are subject to material uncertainty. The provision for pensions and similar obligations amounted to EUR 132,530,000 (2008: EUR 112,669,000) at the balance sheet date. The increase in the pension provision mainly reflects a change in the discount factor. Further information is provided in Note 25.

• Accounting for Restructuring Provisions

The size of the restructuring provision is based on management’s best estimate. Changes in estimates may become necessary as the restructuring plan takes on substance and is implemented. The restructuring provision came to EUR 33,471,000 at 30 September 2009 (2008: EUR 614,000). Further information is provided in Note 26.

• Other Personnel-Related Obligations

Recognition and measurement of other personnel-related obligations – such as partial-retirement obligations – likewise involve estimates and assumptions regarding the expected timing and amount. Actuarial computations are also based on estimates and assumptions. Other personnel-related obligations totalled EUR 35,844,000 at the balance sheet date (2008: EUR 56,461,000) plus EUR 15,495,000 (2008: EUR 20,497,000) relating to partial retirement. Further information is provided in Note 29.

• Share-Based Payment

In determining the fair value of equity instruments, the Group applies a suitable valuation technique (Monte Carlo simulation) that reflects the conditions of its share-based payment scheme. The variables incorporated in the valuation model and the fair values are presented in Note 24.

• Deferred Tax Assets

Deferred tax assets are recognised for tax loss carryforwards to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits. Judgements are made regarding expected timing, the amount of taxable income and future tax planning opportunities. At 30 September 2009, the net carrying amount of deferred tax assets recognised for tax loss carryforwards amounted to EUR 15,248,000 (2008: EUR 9,642,000). Further information is provided in Note 30.

All remaining estimates and assumptions are based on the best available information and the objective of achieving a fair presentation of the financial position, financial performance and cash flows of the Group. Due to the uncertainty associated with estimates and assumptions, actual results may differ from the reported amounts.